Microsoft's Billion-Dollar Nokia Deal

By CIOinsight |
Posted 03-08-2011

What does a
billion dollars buy you?

If you're
Microsoft, it apparently buys you a new manufacturing partner. According to a March
7 Bloomberg report, itself quoting two unnamed sources "with knowledge of
the terms," the company plans on paying Nokia more than $1 billion over five
years to manufacture handsets running Windows Phone 7.

In return,
Nokia apparently plans on paying Microsoft a license fee for every copy of
Windows Phone 7 installed on a smartphone. A final contract remains to be
signed, however, and some additional payment-structure details may emerge in
the meantime.

The
partnership between the two tech behemoths will almost certainly alter the
mobile landscape in coming years. However, some analysts have expressed
reservations over the combined companies' ability to execute in a way that will
actually reap benefits.

"If Nokia
wanted to leave mobile-operating-system development to another company, IHS
thinks Google Inc. and its Android software would have been a better choice,"
William Kidd, an analyst with IHS iSuppli, wrote in a Feb. 14 research note.
"Nokia could have reaped many of the benefits it expects with the Microsoft
relationship from either Google or Microsoft. But clearly, the unspecified
billions in Microsoft cash payments were an important motivating factor in
entering into the deal."